A company's wages and salaries are part of its value added. Suppose, however, that the cleaning and machinery maintenance that its own employees used to do are now contracted out to specialist firms who come in to do the same work more cheaply. a. What happens to the company's value added when it "contracts out" such work? The company's value added will O A. increase, since the company is saving money by losing employees and spending that money on new clients. OB. not change, since the money that the company saves from firing employees is almost equal to what it pays to specialist firms. O C. increase, since the company doesn't have to pay salary to its own employees who used to do this job. O D. decrease, since the company will receive bad reports from fired employees. O E. decrease, since the cleaning and machinery maintenance now become intermediate services purchased from other firms. OF. not change, since now these services are included in value added of specialist firms.

A company's wages and salaries are part of its value added. Suppose, however, that the cleaning and machinery maintenance that its own employees used to do are now contracted out to specialist firms who come in to do the same work more cheaply. a. What happens to the company's value added when it "contracts out" such work? The company's value added will O A. increase, since the company is saving money by losing employees and spending that money on new clients. OB. not change, since the money that the company saves from firing employees is almost equal to what it pays to specialist firms. O C. increase, since the company doesn't have to pay salary to its own employees who used to do this job. O D. decrease, since the company will receive bad reports from fired employees. O E. decrease, since the cleaning and machinery maintenance now become intermediate services purchased from other firms. OF. not change, since now these services are included in value added of specialist firms.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 8PA

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